Calgary, Alberta--(Newsfile Corp. - November 14, 2022) - Sylogist Ltd. (TSX: SYZ) ("Sylogist" or the "Company"), a leading public sector SaaS company, is pleased to announce its unaudited financial results for Q4 2022 (ended September 30), as well as to provide updates on growth investments and a revised capital allocation strategy. Audited five-quarter financials will follow the Company's new December 31 year end.
Executive Summary
Q4 2022 Financial Highlights: Growth momentum continued with revenue of $14.2 million, up 4% from Q3. New bookings are notable, with the Company achieving $12.1 million in bookings during the quarter.
Expanding Investment in Primary Growth Initiatives: Sylogist is making compelling investments to further create value across its core government, education, and nonprofit verticals, and rolling out a new brand strategy to emphasize its offerings and areas of focus.
Capital Allocation Strategy: The Board has decided to materialize the Company's self-funding capabilities. Sylogist will continue investing in its primary platforms and go-to-market capabilities to expand its footprint while steadily amassing readily deployable capital. Given Sylogist's investments in its platform and M&A pipeline, the Company is confident in its ability to attractively redeploy capital for a foreseeable period. Sylogist has therefore declared a new quarterly dividend of $0.01 per share. Sylogist also intends to make a Normal Course Issuer Bid, subject to TSX approval.
Q4 2022 Financial Highlights (all comparisons are to Q4 of Fiscal 2021, unless otherwise noted)
| IFRS Measures | ||||||
| Q4 2022 | Q4 2021 | YoY Change | ||||
| Revenue ($M) | $14.2 | $10.8 | 32% | |||
| Recurring Subscription & Maintenance Rev ($M) | $9.2 | $8.8 | 4% | |||
| Gross Profit ($M) | $8.9 | $8.0 | 11% | |||
| Gross Profit Margin | 62% | 74% | ||||
| Profit Before Income Tax ($M)1 | $0.6 | $1.9 | (68%) | |||
(1) Profit before income tax decrease due primarily to non-cash depreciation charges related to acquisitions, and increased go-to-market spend
| Non-IFRS Measures2 | ||||||
| Q4 2022 | Q4 2021 | YoY Change | ||||
| Revenue Backlog ($M) | $30.6 | $26.0 | 18% | |||
| Adjusted EBITDA ($M) | $4.1 | $4.8 | (14%) | |||
| Adjusted EBITDA Margin | 29% | 44% | ||||
| Adjusted EBITDA per Share | $0.17 | $0.20 | (15%) | |||
Other Financial Highlights
New bookings of $12.1 million, including SaaS subscription contracts with a total value of $5.9 million, and $6.2 million of services;
Q4 revenue backlog of $30.6 million was up 42% from Q3 2022 ($21.6 million)
Year-to-date Adjusted EBITDA margin of 30%.
"Our previous growth investments continued to pay off in Q4, as revenue rose 4% relative to Q3," commented Bill Wood, Sylogist's President and CEO. "Growth was evident in all areas of our business, with $12.1 million in new bookings representing robust growth. This included a $1.2 million increase in Annual Recurring Revenue (ARR), and approximately $6 million of primarily implementation services backlog that we expect to consume over the next year. With promising early results and attractive opportunities across each of our core verticals, we are confident further strategic investment will accelerate value creation."
Expanding Investment in Primary Growth Initiatives
Sylogist is increasing its investment in go-to-market, project delivery capacity, and account management activities. Concurrent with these investments, Sylogist is rolling out a new brand strategy which will simplify messaging, increase marketing return on investment, drive Sylogist brand awareness, and emphasize its core areas of focus. Additional content related to the new brand strategy can be found on the Company's website.
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The Company is investing in the roll-out of its new, 100% SaaS municipal government & citizen engagement SylogistGov solution. The innovative platform includes a fully integrated ERP, taxation, utility billing, asset management, budgeting, citizen engagement, permits & licensing, analytics, and online payments solution for local government, as well as criminal justice case management. The SylogistGov platform is already being implemented at several early-adopter municipalities, with full-scale launch expected in Q2 '23.
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Sylogist is driving the expansion of its SylogistEd ERP, student information, scheduling & grading, lunchroom, and fees & payments platform in the education market. The Company is investing in further go-to-market activities to drive bookings and rollout capacity due to accelerating adoption.
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SylogistMission is an industry first, dollar raised to dollar delivered modular suite that includes ERP, donor & volunteer engagement, fundraising, grants management, outcomes measurement, analytics, and online giving for nonprofit and non-governmental organizations. The Company is seeing its nonprofit/NGO go-to-market strategy gain traction and is making additional investments to accelerate growth and delivery capacity.
"We began to see our strategic investments pay off in Fiscal 2022, as quarterly organic growth went from negative in Q1, to 6% in Q4," commented Bill Wood. "We have identified further acceleration opportunities in our core verticals, and are now making strategic investments to realize those. Due to target markets' spring-to-summer buying cycles, we expect revenue from these new initiatives to ramp late in 2023 and into 2024. While committed to investing behind these exciting initiatives, we remain dedicated to a balanced Rule of 40 posture. We're executing our value creation plan and expect Fiscal 2023 organic growth to climb to low double digits as investments made over the last 18 months take hold; increasing SaaS ARR and creating the opportunity to drive even more upside in '24, and beyond."
Capital Allocation Strategy
To support the strategic plan, Sylogist's Board of Directors approved a reduced quarterly dividend of $0.01 per share. This makes available approximately $11 million per year of free cash flow, which will allow the Company to self-fund growth initiatives, reduce its debt, and to enhance its balance sheet to create greater capacity for strategic M&A in its core verticals. This quarterly dividend will be payable on December 14, 2022 to shareholders of record as at November 30, 2022, and will be treated as an eligible dividend under the Income Tax Act (Canada).
Sylogist also intends to make a Normal Course Issuer Bid, subject to TSX approval. The Company will seek authorization to purchase up to 10% of its public float, which is approximately 2.3 million Common Shares.
"Sylogist allocates capital with a view to maximizing total shareholder value," commented Barry Foster, Sylogist's Board Chair. "Thanks to Management's execution of the strategic plan, Sylogist is a completely different company from the recent past, having made material investments to drive growth while maintaining a 'Rule of 40' posture, which is no easy task. Sylogist's strong cash flow has always enabled self-funded expansion, and accelerating organic growth and a strong M&A pipeline make it clear that shareholders are now best served by deploying more capital behind the value creation opportunities the Company has developed. Sylogist will continue to maintain capital discipline and examine all opportunities to create value."
About Sylogist
Sylogist provides mission-critical SaaS solutions to over 2,000 public sector customers globally across the government, nonprofit, and education verticals. The Company's stock is traded on the Toronto Stock Exchange under the symbol SYZ. Information about Sylogist, inclusive of full financial statements together with Management's Discussion and Analysis, can be found at www.sylogist.com.
Forward-looking Statements
Certain statements in this news release may be forward-looking statements within the meaning of applicable securities laws and regulations. These statements typically use words such as expect, believe, estimate, project, anticipate, plan, may, should, could and would, or the negative of these terms, variations thereof or similar terminology. Forward-looking information in this news release includes statements with respect to adding $1.2 million to ARR, consuming a $6 million services backlog over the next year, accelerating value creation via further strategic investment, winning new municipal ERP business, the full-scale launch of SylogistGov ERP in early '23, accelerated adoption of the Company's education platform, sustaining and accelerating growth in the nonprofit vertical, new initiatives' revenue becoming material in Fiscal 2024, maintaining a Rule of 40 posture, reaching low-double-digit organic growth in Fiscal 2023, self-funding high-ROI organic growth initiatives, seeking TSX approval to make a normal-course issuer bid, the reduction and payment of a quarterly dividend, and maintaining capital discipline and examining all opportunities to create shareholder value. By their very nature, forward-looking statements are based on assumptions and involve inherent risks and uncertainties, both general and specific in nature. It is therefore possible that the beliefs and plans and other forward-looking expectations expressed herein will not be achieved or will prove inaccurate. Although Sylogist believes that the expectations reflected in these forward-looking statements are reasonable, it provides no assurance that these expectations will prove to have been correct. Forward-looking information involves risks, uncertainties and other factors that could cause actual events, results, performance, prospects and opportunities to differ materially from those expressed or implied by such forward-looking information, including its inability to attract key employees or enlist customer support, its inability to develop innovative technology, its inability to find opportunities to deploy free cash flow, continuing headwinds from COVID-19, and economic turmoil. Additional information regarding some of these risks, uncertainties and other factors may be found in the Company's Annual Information Form for the fiscal period ended September 30, 2021 and in the management's discussion and analysis for the fiscal period ended September 30, 2022, and other documents available on the Company's profile at www.sedar.com. Material assumptions and factors that could cause actual results to differ materially from such forward-looking information include Sylogist's ability to attract and retain employees and customers and to realize on its investments, the ability to expand technology partner and customer relationships and the acceleration of organic and inorganic growth. Although Sylogist believes that the material assumptions and factors used in preparing the forward-looking information in this news release are reasonable, undue reliance should not be placed on such information, which only applies as of the date of this news release, and no assurance can be given that such events will occur. Sylogist disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, other than as required by law.
Certain information set out herein may be considered as "financial outlook" within the meaning of applicable securities laws. The purpose of this financial outlook is to provide readers with disclosure regarding Sylogist's reasonable expectations as to the anticipated results of its proposed business activities for the periods indicated. Readers are cautioned that the financial outlook may not be appropriate for other purposes.
Non-IFRS Financial Measures
(2) Revenue Backlog, Adjusted EBITDA, Adjusted EBITDA Margin, and Adjusted EBITDA per share are non-GAAP financial measures. Revenue Backlog is defined as total revenue contracted but not yet recognized. Adjusted EBITDA is defined as: profit for the period before stock-based compensation, share-based payments, foreign exchange gains or losses, interest expense, bargain purchase price on acquisition, income taxes, acquisition-related costs, change in purchase consideration fair value, depreciation and amortization. Adjusted EBITDA Margin refers to Adjusted EBITDA as a percentage of revenue. Adjusted EBITDA per share refers to Adjusted EBITDA per basic weighted average number of shares outstanding.
This news release makes reference to certain non-IFRS measures. These measures are not recognized measures under Canadian IFRS, do not have a standardized meaning prescribed by Canadian IFRS and are therefore may not be comparable to similar measures presented by other issuers. These measures are provided as additional information to complement measures under IFRS by providing further understanding of the Company's expected results of operations from management's perspective. Accordingly, such measures should not be considered in isolation nor as a substitute for analysis of the Company's financial information reported under Canadian IFRS.
Revenue Backlog, Adjusted EBITDA, Adjusted EBITDA Margin, and Adjusted EBITDA per share are provided to investors as alternative methods for assessing the Company's operating results in a manner that is focused on the Company's ongoing operations and to provide a more consistent basis for comparison between periods. These measures should not be construed as alternatives to profit or cash flow from operating activities determined in accordance with IFRS as an indicator of the Company's performance. For further information regarding non-IFRS measures used by the Company, please refer to the management's discussion and analysis of the Company, copies of which are available on Sylogist's SEDAR profile at www.sedar.com.
For further information contact:
Bill Wood, President and CEO
or
Rudy Shirra, Manager, Corporate Development and Investor Relations
Sylogist Ltd.
(403) 266-4808
ir@sylogist.com
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